Tuesday, December 28, 2010

The $583 Trillion Dollar Derivative Market... Is That A Real Number?

Now, before we get all crazy... let me explain.

$583 Trillion is the notional or "face" value of the derivatives market.  As discussed in the link below, this "number" is indeed 900% larger than the global GDP which is somewhere's about $65 Trillion.  However, its also substantially smaller than the number of molecules in the head of a pin... and perhaps as relevant.

What matters is "Value at Risk"... Yea yea, I know.  VaR is very tricky and fraught with danger when one considers the "True" definition of risk vs some statistical measure (I read Taleb too)...  But, its important to remember that it isn't like somebody borrowed $585T... its a number which is related to the size of the bet... but its "the movement that matters" (behave :-)

This caveat noted... DAMN... thats one big bet!!! 

I'm guessin' this doesn't end well.

Thanks G. (friend) for sending this.

Let Freedom Ring,

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